Monday, October 10, 2011

French economy on the brink of collapse - Think Tank Says Bailout Fund Will Need $6 Trillion And France Will Lose AAA Rating

Pardon while we chuckle, because $1 trillion, let alone $6 trillion,
is never going to happen in Europe. Where do they plan to get the money, Euro Claus?

Consisdering that the current proposal being voted on by all 17
Eurozone members calls for a fund of less than $500 billion, this new
number, though more realistic in terms of the size needed to fix the
problem, is a political impossibility, especially given the popular
resistance among voters in France and Germany to bailouts for
irresponsible neighboring countries.

Financial TimesExcerpt:Many European policymakers are beginning to envisage the fund,
known formally as the European financial stability facility, as a
nascent eurozone treasury that could sit alongside the European Central Bank.
It would be quickly tapped to deal with crises without relying on
national parliaments, which cannot act at the speed demanded by markets.Senior officials have even begun referring to this future
construction by a new name, the European Monetary Fund, which would
operate like many other European Union institutions – with decisions
taken by a qualified majority vote rather than unanimity. Such proposals
will feature in a review of eurozone governance overseen by Herman Van
Rompuy, the European Council president, next monthDaniel
Gros, director of the Centre for European Policy Studies think-tank,
estimated that under some scenarios, the EFSF – and its successor, a
permanent agency called the European Stability Mechanism – would have to
be as big as €4,000bn ($5.6 trillion).
Such an increase would mean France, whose triple A rating is
essential to the market credibility of the EFSF, would see its debt
levels rocket, at a time when its bond rating is already under scrutiny.
“It’s just not conceivable to have a much larger EFSF and still have France as triple A,” said Mr Gros.
---DB here. Meanwhile UK Prime Minister David Cameron is in the news today
calling for "a big bazooka approach to bailouts" warning they have only
a few weeks to avert economic disaster. And Merkel and Sarkozy met
again today and claim to have reached agreement on a massive EURO bank bailout, though neither would release details.